There has been a huge spike in the number of company insolvencies in the past year by 72 per cent, as hospitality bears the brunt of soaring energy bills.
New figures from the Insolvency Service show pubs, bars and restaurants have been the worst affected, being “from both sides” by the cost of living crisis.
In data shared by audit, tax and advisory firm Mazars, the number of insolvencies went up 72 per cent up to 31 August, to 20,512 from 11,949 last year
Hardest hit was the hospitality sector, with 216 insolvent pubs, bars and restraints in the last month alone, up 37 per cent from 158 in July.
There were almost 2,000 firms gong down last month in total, with the number pubs and bars going insolvent soaring by almost 60 per cent in the last year, to 2156.
The soaring cost of energy due to the war in Ukraine among other factors, in addition to 80 per cent increase in energy price cap, and higher interest rates, has forced many outlets to consider whether they can stay open.
This comes despite Prime Minister Liz Truss’ £150bn support package to tackle the energy crisis.
UKHospitality CEO, Kate Nicholls, said the “industry is under huge pressure and this increase in insolvencies reflects what we are hearing from businesses – that trading is extremely difficult and many are struggling to survive. The lack of time to recover from the ravages of Covid is weighing particularly hard on our sector, as is the squeeze on household incomes.”
“We need to see decisive action from Government next week – in addition to the energy price guarantee we need to see a cut in the rate of VAT and a business rates holiday. Without such support businesses big and small will fail, thousands of jobs will be lost and hundreds of communities will lose valuable local assets.”
Meanwhile, Mazars’ partner Adam Harris added that “the size of energy price rises was always likely to cause some businesses to close but the scale and pace of these insolvencies is especially concerning”,
“Small business owners in particular are struggling under the weight of multiple crises, often without the resources or financial cushion to see them through.”
“The hospitality sector is facing an unusually challenging environment as the cost-of-living crisis hits them from both sides.”
Just as their energy costs are spiral and their interest costs rise their customers are cutting spending on non-essentials such as eating out.”
He said Truss’ energy support package will be “key to determining whether many businesses survive”.